Wage rates to rise in April
Jan 09, 2020
On New Year’s Eve, as you were preparing the see in the new decade, the Government announced that it will be increasing official minimum wage rates from the start of April 2020.
The National Living Wage for low paid workers aged 25 and over will increase by 6.2%, from £8.21 an hour to £8.72 an hour. This rise is more than four times the rate of inflation, and will equate to an additional £930 in the pay packets of a full time worker.
New minimum wage rates from April 2020
Younger workers will also see their pay packets rising. Depending on their age, wages will go up between 4.6% and 6.5%. From April 2020, the new rates are:
- Ages 25 and above – £8.72 (up from £8.21 – 6.2% increase)
- 21-24-year olds – £8.29 (up from £7.70 – 6.5% increase)
- 18-20-year olds – £6.45 (up from £6.15 – 4.9% increase)
- 16-17-year-olds – £4.55 (up from £4.35 – 4.6% increase)
- Apprentices – £4.15 (up from £3.90 – a 6.4% increase)
The government has declared that this upcoming increase to the National Living Wage (NLW) is “the biggest cash increase ever”, which will improve the pay for 2.8 million people. It is acting on recommendations made by the Low Pay Commission, and this increase puts the government on target for the NLW to reach 60% of median earnings by 2020.
Prime Minister Boris Johnson stated:
“Hard work should always pay, but for too long, people haven’t seen the pay rises they deserve.”
Chancellor of the Exchequer Sajid Javid, said:
“We want to end low pay and put more money in the pockets of hard-working families. This latest rise will mean that since we introduced the National Living Wage in 2016, the lowest paid will have had a wage increase of more than £3,600.
“But we want to do more to level up and tackle the cost of living, which is why the NLW will increase further to £10.50 by 2024 on current forecasts.”
The effect on businesses
Although these increases to wage rates are great news for workers, the businesses that have to pay them are likely to feel the pressure. During a period of considerable economic uncertainty surrounding Brexit, funding such a large rise in wages could mean that companies struggle and that they’re forced to make cut backs elsewhere. They may have to scale back recruitment or even consider redundancies, which could make the wage increase counter-productive.
The Federation of Small Businesses (FSB) and the British Chambers of Commerce have both raised alarm bells on the negative impact of such a large wage increase.
Hannah Essex, co-executive director of the British Chambers of Commerce, said “Raising wage floors so far above the rate of inflation will pile further pressure on cash flow and eat into training and investment budgets”.
The FSB’s director of external affairs and advocacy, Craig Beaumont, said, “Wage increases aren’t much good to workers if prices rise, jobs are lost and there’s no impact on productivity because employers are forced to cut back on investing in tech, training and equipment.”
Both organisations have called for the government to offset the wage increase by reducing costs elsewhere for firms. The FSB has urged the government to provide sufficient support for businesses, particularly in light of the 1.7% increase in business rates which is due to come into effect this April.
The government also plans to implement further recommendations from the Low Pay Commission, by lowering the age that workers can receive the National Living Wage from 25 to 21 by 2024.
If you are concerned about the upcoming increases to minimum wage rates, or have any queries about this upcoming change in employer obligations, then please don’t hesitate to get in touch with the PT team.